'In China We Trust': Senators Closed Door to US Oil Investment In Iraq

In No Oil for Blood, co-architect for the successful surge strategy in Iraq Fred Kagan details how three US Senators killed an Iraqi deal with US oil firms to develop part of their industry. And in so doing, the door was opened for China to seize the contracts instead. It's maddening, and on par with the logic of watching Chinese oil companies drill for oil and gas resources just off the Florida coast and not us.

The Iraqi government was poised to sign no-bid contracts with those firms this summer to help make immediate and needed improvements in Iraq's oil infrastructure. The result would have been significant foreign investment in Iraq, an expansion of Iraqi government revenues, and an increase in the global supply of oil. One would have thought that leading Democratic senators who claim to be interested in finding other sources of funding to replace American dollars in Iraq, in helping Iraq spend its own money on its own people, and in lowering the price of gasoline for American citizens, would have been all for it. Instead, Senators Chuck Schumer, John Kerry, and Claire McCaskill wrote a letter to Secretary of State Rice asking her "to persuade the GOI [Government of Iraq] to refrain from signing contracts with multinational oil companies until a hydrocarbon law is in effect in Iraq." The Bush administration wisely refused to do so, but the resulting media hooraw in Iraq led to the cancellation of the contracts, and helps to explain why Iraq is doing oil deals instead with China.

Senators Schumer, McCaskill, and Kerry claimed to be acting from the purest of motives: "It is our fear that this action by the Iraqi government could further deepen political tensions in Iraq and put our service members in even great danger." For that reason, presumably, Schumer went so far as to ask the senior vice president of Exxon "if his company would agree to wait until the GOI produced a fair, equitable, and transparent hydrocarbon revenue sharing law before it signed any long-term agreement with the GOI." Exxon naturally refused, but Schumer managed to get the deal killed anyway. But the ostensible premise of the senators' objections was false--Iraq may not have a hydrocarbons law, but the central government has been sharing oil revenues equitably and there is no reason at all to imagine that signing the deals would have generated increased violence (and this was certainly not the view of American civilian and military officials on the ground in Iraq at the time). It is certain that killing the deals has delayed the maturation of Iraq's oil industry without producing the desired hydrocarbons legislation.

Iraq wanted immediate investment. Three senators - Kerry, Schumer and McCaskill - denied American participation. They stopped nothing and accomplished nothing other than empowering China in the global competition for resources and hurting our own American position, again.

It begs the question: Who do you trust, America's Exxon or China's CNOOC? We know who they seem to openly hate. Our own.